The long-running construction industry slump on the neighbor islands is finally reaching bottom, setting the stage for expansion over the next several years, according to a report released today by the University of Hawaii Economic Research Organization.

As is the case on Oahu, however, the leading economic driver on the neighbor islands will be the visitor industry, propelled by a continuing boom in visitors from international markets outside of Japan, UHERO researchers reported.

The modest job growth across all counties that began last year will pick up momentum in 2012 as a decline in government jobs begins to reverse course. In addition, construction jobs growth will be uniform across all counties for the first time in several years, according to the report.

"Construction will finally turn the corner on the neighbor islands, and Oahu will feel the positive effect of renewed commercial activity and the initial phases of work on rail rapid transit," the researchers wrote.

"In broad brushstrokes the recovery in Hawaii’s counties is progressing more or less as we expected," they wrote. "The visitor industry is doing a bit better than anticipated, and it is taking longer than we had hoped to see job growth spread beyond the tourism sectors. But we always knew this would be an uphill struggle to see adequate growth restored in the wake of the financial crisis."

Hawaii County, which had the slowest recovery of its tourism industry following the economic downturn, will see the sharpest gains in visitor arrivals this year and next, the forecast said.

The job market in Hawaii County, which continued to contract through 2011, will see broad-based growth this year "as the rapid contraction of construction will come to an end," according to the report.

Kauai’s projected 9.7 percent increase in visitor arrivals this year will be the second highest of any county after Hawaii County’s expected 10.8 percent gain, the report said.